Goldman Sachs: Bank of England to hold off on hiking rates until February

Goldman Sachs have reined in their bet on the Bank of England hiking interest rates at their next meeting due to uncertainty over the trajectory of the Omicron variant.

The Wall Street giant had previously expected the Bank to raise rates 15 basis points at its next meeting of rate setters on 16 December.

However, the investment bank has now kicked its prediction into the long grass. 

Goldman now expects the Old Lady to raise rates in February next year.

Uncertainty over whether Omicron will prompt the UK government to reimpose even tougher measures to curb the spread of the virus has intensified uncertainty over the trajectory of the economy, leading Goldman to push its rate hike projections.

Prime Minister Boris Johnson is expected to launch the government’s plan B measures, including advice to work from home, vaccine passports and mask wearing in a greater number of settings.

However, the Bank will likely look through Omicron once more information is gathered and hike rates soon, Goldman said.

The monetary policy committee will “signal that this is only a short delay to gather more information on Omicron, and indicate that a hike remains appropriate in coming months,” the Wall Street investment bank said.

The Bank will then hike rates again in May next year and that borrowing costs will reach one per cent at the beginning of 2023.